Superior Court of California 

County of Los Angeles – West District 

Beverly Hills Courthouse / Department 205 

 

 

 

BACKGROUND 

Plaintiffs Evan Kagan and Safaa Idyouss own the property located at 2693 Old Topanga Canyon Road, Topanga California 90290 (the “Property”).  On or about November 6, 2019, Plaintiffs took out a business loan from Athas Capital Group, Inc. (“Athas”) in the amount of $1,806,000.00 (the “Loan”).  (Ex. A to Kagan Decl.)  A Deed of Trust (“DOT”) on the Property was recorded, with Athas as beneficiary.  (Id.) 

Pursuant to the terms of the loan, Plaintiffs represented and warranted that “the proceeds of this Note will be used solely for business, commercial investment, or similar purposes and that no portion of it will be used for personal, family or household purposes.”  (Ex. A to Bush Decl.)  Similarly, in an “Occupancy Rider” to the Deed of Trust, Plaintiffs specifically agreed that the Property “is not [their] principal residence and [they] ha[ve] no intention of ever making the Property [their] principal residence.”  (Ex. A to Kagan Decl.) 

Athas assigned all beneficial interest under the DOT to Wilmington Savings Fund Society, FSB (“Wilmington”).  (Ex. B to Kagan Decl.)  Wilmington then assigned all beneficial interests under the DOT to Defendant US Bank.  (Ex. C to Kagan Decl.)  Defendant Newrez LLC f/k/a New Penn Financial LLC d/b/a Shellpoint Mortgage Servicing (“Shellpoint”) was the mortgage servicer on the loan.  (Ex. D to Kagan Decl.) 

Plaintiffs defaulted on their monthly loan payments.  On November 28, 2022, Defendant Quality Loan Service corporation (“Quality”), a debt collection agency, on behalf of US Bank and Shellpoint, caused a Notice of Default (“NOD”) to be recorded against the Property.  (Ex. D to Kagan Decl.)   Attached to the NOD is a declaration of compliance, which alleges that “The mortgage servicer has tried with due diligence to contact the borrower as required by California Civil Code § 2923.55(f) but has not made contact despite such due diligence.  The due diligence efforts were satisfied on 6-6-2022.”  (Ex. D to Kagan Decl.)   

Contrary to the declaration of compliance, Plaintiffs allege they did not receive a certified letter with foreclosure prevention options, nor did Defendants attempt to contact them in compliance with Civ. Code § 2923.55(f)).  (Kagan Decl. ¶8.)  Plaintiffs further claim they were not assigned a single point of contact (“SPOC”), which had one been assigned would have prevented Defendants from initiating the foreclosure process on the Property.  (Id. ¶8.)    

In or around January 2023, Plaintiffs submitted a loss mitigation application to Shellpoint for review (the “January 2023 Application”).  (Id. ¶10.)  Plaintiffs did not receive a written determination on their January 2023 Application.  (Id. at ¶11.)  

On March 9, 2023, Quality, on behalf of Shellpoint and US Bank, recorded its Notice of Trustee’s Sale (“NTS #1”) against the Property, despite the fact that Plaintiffs had not received a written determination on their January 2023 Application.  (Id. ¶12; Ex. E to Kagan Decl.)   

On April 2, 2023, Plaintiff Evan Kagan filed a Chapter 13 bankruptcy, which was converted to a Chapter 11 bankruptcy, as bankruptcy petition no. 1:23-bk-10416-MB (the “Bankruptcy”).  (Id. at ¶13.)  

In or around February 2024, Plaintiffs submitted another loss mitigation application to Shellpoint for review (the “February 2024 Application”).  (Id. ¶14.)  In or around March 2024, Plaintiffs submitted yet another loss mitigation application to Shellpoint for review (the “March 2024 Application”).  (Id. ¶15.)  Plaintiffs have not received a written determination on either application.  (Id. at ¶16.)  

On May 9, 2024, the Bankruptcy was dismissed.  (Id. ¶17.)  On May 9, 2024, Quality, on behalf of Shellpoint and US Bank, recorded its Notice of Trustee’s Sale (“NTS #2”) against the Property.  (Ex. F to Kagan Decl.)  

On or around June 4, 2024, Kagan submitted another loss mitigation application via email, to Shellpoint Commercial Loan Consultant agent Juan Harris.  (Id. ¶19; Ex. G.)  On June 5, 2024, Harris emailed Kagan stating, “The request was denied and there is a foreclosure sale date for 6/13/2024.  $541,341.28 needs to be paid before that date.”  (Ex. H to Kagan Decl.) Plaintiffs have not received a written statement stating the reason(s) behind Shellpoint’s denial of the June 2024 Application.  (Id. ¶21.)   

The operative complaint alleges seven claims for (1) violation of Civ. Code § 2923.5; (2) violation of Civ. Code § 2923.6; (3) violation of Civ. Code § 2924.17(b); and (4) violation of Bus. & Prof. Code § 17200.  All of the claims are premised on a purported violation of the Homeowners’ Bill of Rights (“HBOR”).  

This hearing is on Plaintiffs’ motion for preliminary injunction, seeking to enjoin Defendants from foreclosing on the Property.  Plaintiffs argue that Defendants have violated Civ. Code §§ 2923.5, 2923.6 and 2924.17, and these violations entitle Plaintiffs to injunctive relief.  Plaintiffs also argue that Defendants’ conduct violates Bus. & Prof. Code § 17200, which gives the Court “broad authority” to enjoin the conduct.     

LEGAL STANDARD 

In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial; and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction.  (C.C.P. §526(a); 14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1402; Pillsbury, Madison & Sutro v. Schectman (1997) 55 Cal.App.4th 1279, 1283. 

The court must consider both factors.  The two factors are on a sliding scale – the stronger the showing of probability of prevailing, the lesser showing is required for irreparable harm.  (Butt v. State 4 Cal.4th at 678.)  The plaintiff must make some showing of each factor. (Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454, 459.)  A court may not issue a preliminary injunction if the plaintiff cannot possibly prevail on the merits even if a strong showing of irreparable harm has been made.  (Butt v. State (1992) 4 Cal.4th 668, 677-78.) 

The court’s ruling on a preliminary injunction is not an adjudication of the merits, is not a trial, and does not require a statement of decision.  (Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 286; People v. Landlords Professional Services, Inc. (1986) 178 Cal.App.3d 68, 70-71.)  The Court is not required to state its reasons for granting or denying a preliminary injunction; a cursory statement is sufficient. (City of Los Altos v. Barnes (1992) 3 Cal.App.4th 1193, 1198.)¿ 

DISCUSSION 

Defendants argue that Plaintiffs cannot show a probability of prevailing because they are not entitled to the protections of the HBOR.  The Court agrees.    

Pursuant to § 2924.15, the protections of the HBOR only apply to an “owner-occupied” residential real property.  (Civ. Code § 2924.15(a)(1).)  The term “owner-occupied” means the property is the “principal residence of the borrower and is security for a loan made for personal, family, or household purposes.”  (Id.)  

In his supporting declaration, Plaintiff Kagan contends Plaintiffs are borrowers, as defined by Section 2920.5 of the HBOR and that the Property is “owner occupied” under Section 2924.15.  (Comp., ¶ 1; Kagan Decl. ¶ 2.)  However, Plaintiffs specifically agreed in the Deed of Trust that they would not be occupying the Property as their primary residence and that they never intended to occupy it as a principal residence.  (Ex. A to Kagan Decl.)  In addition, Plaintiffs admitted as recently as June 2024 in a loss mitigation application that their primary residence is in Florida, and that they have tenants that occupy the Property.  (Ex. B to Bush Decl.)  Plaintiffs checked the box on the Form indicating that the property is “Occupied by Non-Borrower/Tenant.” (Id.)  They responded “No” to the question “Do you intend to occupy the property as your primary residence." (Id.)  

It is clear from Defendants’ evidence that the Property is not owner-occupied and is used as a rental.  Therefore, the HBOR does not apply, and Plaintiffs are unable to demonstrate a likelihood of success on the merits of their claims in the Complaint.  

Moreover, for a borrower to qualify for HBOR protections, the subject property must be security for a loan used for personal, family, or household purposes. (Civ. Code § 2924.15(a)(1)(B).)  As set forth in the loan documents, Plaintiffs' loan was a commercial loan, and it was not made for personal, family or household purposes. (Ex. A to Bush Decl.) In his Declaration, Plaintiff Kagan admits that he took out a “business purpose loan”.  (Kagan Decl., ¶ 3.)  Accordingly, for this additional reason, Plaintiffs fail to meet their burden of proof in demonstrating that they have a likelihood of prevailing on their HBOR claims in the Complaint.  

CONCLUSION 

Based on the foregoing, the Court DENIES Plaintiffs’ motion for preliminary injunction.   

IT IS SO ORDERED. 

 

DATED:  September 13, 2024 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court